Pros and Cons of Investing in Five Below NNN Properties (2025 Guide)

Investing in Five Below NNN Properties: A Complete Guide Five Below is a leading discount retail tenant that investors frequently target for triple net (NNN) lease investments. This guide breaks down the key considerations for buying a Five Below property, including the advantages and potential risks you should evaluate. About Five Below Five Below operates in the Discount Retail sector with a credit rating of BB+. Properties typically feature 10-year initial lease terms with NNN structure, making them attractive for passive income investors. Key Characteristics: - Teen-focused - Growth retailer - Strip center preferred Pros of Investing in Five Below Properties Potentially Higher Cap Rates: Non-investment grade tenants often trade at higher cap rates, offering better cash-on-cash returns. Rent Reset Opportunities: Shorter terms allow for more frequent rent increases to market rates. Recession-Resistant Model: Discount retailers often outperform during economic downturns as consumers trade down. Rural/Suburban Footprint: Less competition from e-commerce in underserved markets. Cons and Risk Factors Non-Investment Grade Credit (BB+): Higher risk profile may require more due diligence and could affect financing options. Shorter Lease Terms (10 years): More frequent lease negotiations and potential for vacancy. Lower Average Rents: Discount retailers typically pay lower absolute rents than premium tenants. Typical Deal Structure - Lease Term: 10 years initial term - Lease Type: Typically NNN (Triple Net) - Credit Rating: BB+ - Investment Grade: No Market Considerations When evaluating a Five Below property, consider these market-specific factors: 1. Location Quality: Assess the property's position within the trade area, traffic counts, and visibility 2. Lease Terms: Review remaining lease term, rent escalations, and renewal options 3. Cap Rate Comparison: Compare the offering cap rate to recent Five Below transactions in similar markets 4. Franchisee vs. Corporate: Determine whether the lease is guaranteed by a franchisee or the corporate entity 1031 Exchange Suitability Five Below properties are occasionally used as replacement properties in 1031 exchanges due to their stable income characteristics. The NNN structure simplifies property management, making these assets attractive for exchange buyers seeking passive investments. <a href="/deals?tenant=five%20below">Browse available Five Below properties →</a> The Bottom Line Five Below properties offer the stability of a national brand and NNN lease structure. While the credit profile requires more scrutiny, higher cap rates may compensate for the additional risk. As with any net lease investment, thorough due diligence on the specific location, lease terms, and market conditions is essential. Ready to explore Five Below investment opportunities? <a href="/deals">Browse our marketplace</a> or <a href="/tools/1031-exchange">use our 1031 exchange tools</a> to plan your next acquisition.